Best Buy’s stock (NYSE: BBY) experienced an unexpected decline, dropping 13% on March 4, despite surpassing estimates in its fourth-quarter earnings report (ended Feb 1). This drop was considerably steeper than that of the broader market, where the S&P fell approximately 1.2% on the same day. The slump in Best Buy’s stock underscores the challenges in the consumer electronics retail sector, which is facing tough comparisons following a pandemic-driven sales surge. Rising inflation and the possibility of tariff-induced price increases have added to the uncertainty, casting a shadow over the retailer’s outlook. Concerns regarding profitability and consumer demand have emerged as key issues for investors as the company navigates a complex and rapidly evolving environment. Separately, see Inflation to Sink S&P 500, Brace For Impact?
Best Buy’s Q4’25 revenue decreased by 5% year-over-year to $13.95 billion. On the bottom line, the company’s earnings dropped significantly to $0.54 per share, compared to $2.12 per share during the same period last year. However, after adjusting for a non-cash goodwill impairment charge and other restructuring measures, Best Buy’s adjusted earnings reached $2.58 per share. A notable highlight of the quarter was the company’s comparable sales, which increased by 0.5% (in contrast to a 4.8% decline in Q4’24), excluding the additional week in fiscal 2024. This performance surpassed Best Buy’s guidance, which had predicted a change ranging from flat to a 3% decline. In the U.S., quarterly comparable sales demonstrated resilience, rising 0.2% year-over-year. If you are seeking upside with a smoother ride than that of an individual stock, consider the High Quality portfolio, which has outperformed the S&P and achieved over 91% returns since its inception.
How Can Tariffs Impact Best Buy?
The recent implementation of 25% tariffs on imports from Mexico and Canada, along with a doubling of duties on Chinese goods to 20%, is expected to have substantial implications for Best Buy’s operations. Since China and Mexico are the company’s two largest supply chain sources, contributing approximately 55% and 20% of its products respectively, these tariffs are likely to increase costs for the retailer. Best Buy anticipates that its vendors will pass on some of the tariff costs to consumers, leading to higher prices for American shoppers. Notably, direct imports account for only 2-3% of its products.
Given Best Buy’s six-week inventory cycle, the company expects the pricing changes to take effect mainly during the Q2–Q4 period of the fiscal year. Consequently, investors should be prepared for potential effects on the company’s financial performance and consumer demand as the full impact of the tariffs and pricing adjustments unfolds.
The decline in BBY stock over the past four years has been inconsistent, although its annual returns were considerably less volatile than those of the S&P 500. The stock achieved returns of 4% in 2021, -17% in 2022, 3% in 2023, and 14% in 2024. In contrast, the Trefis Best Buy’s Revenues are forecast to reach $41.4 billion for fiscal 2026, and the Best Buy’s Valuation has been revised to $79 per share. As a result, the Trefis High Quality Portfolio, which comprises 30 stocks, has been less volatile and has comfortably outperformed the S&P 500 over the last four years. Why is this the case? Overall, the HQ Portfolio stocks delivered superior returns with lower risk compared to the benchmark index, resulting in a less turbulent performance as shown by the HQ Portfolio performance metrics.
Can Best Buy Live Up To Its Name?
Best Buy has been broadening its service offerings, particularly through Geek Squad and its health segment, to support product sales, improve margins, and enhance customer engagement. This strategy, along with expanded membership programs, has spurred growth by increasing gross margins to 22.6% for the full year of FY 2025 from 22.1% in the previous year. Additionally, its adjusted operating margins grew by 10 basis points to 4.2% during the same period. Strategic initiatives, such as expanding Best Buy Express in Canada and planning a U.S. marketplace launch, are expected to drive future growth.
Best Buy’s appliances division is encountering headwinds, as sluggish U.S. home sales and evolving consumer preferences dampen demand. This trend resulted in an 11.4% year-over-year decline in comparable appliance sales in the U.S. during Q4. In contrast, Best Buy’s international segment defied this trend by achieving a 4.9% increase in appliance sales for the fourth quarter.
For fiscal 2026, Best Buy has issued full-year guidance, projecting revenue between $41.4 billion and $42.2 billion (compared to $41.5 billion in FY 2025) and expecting comparable sales growth of 0% to 2% year-over-year. Notably, this guidance does not account for the potential impact of recent or proposed tariffs. Looking forward, Best Buy anticipates that consumer behavior will maintain the same resilience and caution observed in FY 2025, as persistent high inflation continues to drive up household expenses and encourage a discerning, value-focused approach to discretionary spending, particularly on big-ticket items.
We project Best Buy’s revenues to reach $41.4 billion for the full year 2026, marking a marginal year-over-year increase. Regarding profitability, we now forecast adjusted EPS of $6.23. In light of the revised revenue and earnings forecasts, we have updated our valuation of Best Buy to $79 per share, based on an expected EPS of $6.56 and a 12.0x P/E multiple for fiscal 2026 – nearly aligning with the current market price.
It is useful to observe how its peers compare. Review how Best Buy’s Peers perform on key metrics. Additionally, you can find other valuable comparisons for companies across various industries under Peer Comparisons.
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